ECB policymaker Joachim Nagel confirmed a December rate hike is likely necessary to meet inflation goals, despite recent relief in energy costs.
ECB Governing Council member Nagel called a December rate hike 'rather obvious' and stressed the bank will do what's needed to return inflation to 2%. A concrete hike signal from a key policymaker supports higher euro rates and a stronger euro, despite his acknowledgment that falling energy prices are good news.
A hawkish signal from ECB policymaker Nagel, calling a December hike 'rather obvious', points to higher euro rates relative to the dollar and supports the pair. However, today's table shows EUR down 0.37% against USD, meaning dollar strength is currently offsetting the hawkish euro message.
A clear signal from a senior ECB official that a December rate hike is 'rather obvious' pushes expectations of tighter eurozone monetary policy, which typically lifts eurozone benchmark yields such as the German Bund. His comment that there is no risk of fiscal dominance supports the same direction.
Bundesbank President and ECB Governing Council member Joachim Nagel stated that a December rate hike is "rather obvious" to ensure inflation returns to the 2% target. While acknowledging that lower energy prices since the US midterm elections are positive, Nagel emphasized that central bank decisions remain independent of market expectations.
Nagel sits on the ECB Governing Council, and his statement that a December rate hike is 'rather obvious' signals tighter eurozone monetary policy, which typically supports the euro.
Nagel called the drop in energy prices since the US midterm elections good news, but he still said a December increase is obvious and that the ECB will do what's needed to reach 2% inflation.
The remarks support a rate hike in December, which is positive for the euro against the dollar, but the article's table shows EUR down 0.37% versus USD today, so dollar moves still matter.
Signals of an upcoming ECB rate hike raise expectations of tighter policy, which usually pushes benchmark eurozone yields, including the German 10-year Bund, higher.